Tax in 2020: A Q&A with Deloitte tax innovation experts – Part 1

Tax in 2020: A Q&A with Deloitte tax innovation experts - Part 1

Accountancy Age spoke with Deloitte tax innovation experts Andy Gold and Chuck Kosal on the topic of Deloitte's tax plans for 2020, innovative tax solutions, and the importance of transparency in client and customer digital interactions.

Tax in 2020: A Q&A with Deloitte tax innovation experts – Part 1

In order to address the difficulties faced by tax professionals struggling to manage the analysis of complex tax data for indirect tax, several technological advancements have been made. One such example is Cognitive Tax Insight, or ‘CogTax’, which has been developed by professional services giant Deloitte. It aims to provide an increased, improved and more efficient analysis of client’s indirect tax data set, and can analyse the full population of a client’s accounts payable transactions, compared to a more traditional, sampled approach.

CogTax features as part of Deloitte’s “Tax in 2020” initiative, which is seeing the firm invest in building a “seamless global tax experience” for Deloitte’s clients, and is focused on re-thinking how clients navigate the change and complexity of the tax profession.

With it, tax professionals can save time and resources, but can also help companies to proactively avoid the overpayment of indirect tax liabilities. Using Optical Character Recognition (OCR), along with machine learning algorithms and analytics, CogTax can analyse data and documents to assist clients with indirect tax overpayment recovery, and reduce the problem in the future.

As it represents a current example of how technology and machine learning can be utilised in both the tax and accounting industries, Accountancy Age spoke to US-based Andy Gold, tax innovation partner and Chuck Kosal, Chief Transformation Officer, both at Deloitte Tax LLP.

In the first part of this two-part interview series, Chuck and Andy explain CogTax further, Deloitte’s vision for ‘Tax in 2020’, and the importance of transparency.


Q: To begin with, could you give an overview of CogTax, and the thinking behind it?

Andy Gold: Cognitive Tax Insight, or Cog Tax, is a cognitive platform that we developed to try to deal with the challenges in the indirect tax space, where companies are challenged to understand the tax determinations as the transaction occurs: is that transaction taxable or non-taxable? And when you’re looking at thousands, or hundreds of thousands, or millions of transactions, that’s very challenging

Through our firms’ years of investing in cognitive and artificial intelligence exploration in areas outside of tax, we thought we aim this at tax. So essentially, we’re able to take a machine learning platform and optical character recognition, or OCR technology, ingest structured data – purchasing information, ERP systems data, unstructured data, the invoice information that we can read through OCR – and bring that into the cognitive platform. There, we’re able to train the technology through human intervention looking at all the structured and unstructured data in the platform making and some determinations on a handful of transactions. The technology starts to learn the relationships and develop algorithms to predict the future, as we ingest new transactions, whether something will be taxable or non-taxable.

Q: Is this something that’s still in development, that you are currently rolling out, or is it very much being used day today?

Andy Gold: We’ve been working on this for the last three years, and we’re working with clients and having really great success. And the real power here is that rather than continuing having to look at these transactions and the tax determinations in hindsight, we’re able to develop a trained technology where a client can rely on, and really predict, whether that transaction is going to be taxable or non-taxable, so getting in front of those tax determinations on a more real-time basis.

Q: CogTax is part of Deloitte’s ‘Tax in 2020’ initiative – could you elaborate on this?

Chuck Kosal: I’m actually the global leader of it, and our Tax in 2020 vision and strategy is really about this concept of being digital. We would say currently in the profession most of the accounting firms, as well as our clients, are currently doing digital and they’re developing point solutions that might solve individual problems.

But our Tax in 2020 strategy is about being digital, meaning that we want to change the entire user experience, our client experience, the experience our professionals actually are engaged in every single day to create a truly digital kind of end to end process to everything we do. And so we’re investing heavily in all of our technology, in a global integrated platform, to serve our clients in a truly global integrated digital way.

Q: So with Deloitte’s ‘Tax in 2020’, is 2020 the point where you say ‘right, from now on everything is going to be digital, anything we innovatively we have to be thinking about digital as the key focus’?

Chuck Kosal: We’ve been thinking about that, and I’m sure everybody in the business has been thinking about it, and our clients have been thinking about it. But I think what we’re doing is taking it to the next level saying, ‘it’s not enough to think about it, it’s about doing it in a way where everything is integrated,’ everything is a single user experience.

If you were to think about how you act and how you live your day, if you could imagine going to any type of service provider and having the experience be point solution. Let’s say if you went to your doctor, having one experience when you go to your orthopaedic surgeon and a different experience when you go to your family doctor, that’s what is currently happening in the profession.

There are individual point solutions for everything we do versus integrated and common and transparent and experiences that feel the same every time you are engaged in regardless of the issue; whether it’s a direct tax or an indirect tax they all shouldn’t feel different. We use technology to solve most of the problems out there today but they’re very disparate. Everything is an individual point solution.

Q: Going back to Cog Tax in particular then, is this something which you see your own accountants using, or is it something you offer to your clients to use it themselves?

Chuck Kosal: In our digital transformation the 2020 strategy is actually both. What we’ve heard from doing interviews with our clients, what they’re looking for from us is what they experience in everyday life, whether you think about Uber or how you order a pizza or how you order consumer goods online, our clients are looking for transparency, they’re looking for a personalised experiences, and the same thing is true for our people.

So when we talk about how we use the platform, it is going to be very focused on this collaboration with our clients, to have a true partnership with our clients and transparency between the work that’s being done, and the elimination of the proverbial black holes or throwing things over the wall, and a lot of that happens in the business.

There’s always gaps in the communication and understanding where things are in phases of projects is key. The vision we have is collaborative. It’s both our clients and our professionals working in a common workspace and having common access, or equal access, to the content they need, the technology they need, to be digital.

Q: So there’s an emphasis on transparency, everybody being able to see what’s happening?

Chuck Kosal: Yes, transparency is really important to our clients, and it’s important to us. You could talk about Uber as an example. One of the value propositions with Uber is that you know where the car is all the time. When you order a car, you know how far away it is and how long is it going to take to get to you. Some of those experiences aren’t available in public accounting, not just tax which is public accounting, and so there’s transparency in the thought process that’s been applied, and the workflow that we’re undergoing. So yes, our clients have been very, very, open in their desire here to say, ‘we’d like to see more transparency,’ and we agree, and our people feel the same way.

 Q: In the UK, there’s a big push towards digital. We’ve got making tax digital, which is a huge thing for businesses at the moment. But when you’re talking globally, and you have different taxation regulations in different countries such as this, how do you go about making sure you meet all regulatory requirements, rather than just in, say, the UK or the US.

Chuck Kosal: It is the kind of thing that keeps me awake at night in the sense that this is the heavy lift, this is very complex in what we’re doing. What we’re doing is probably traditional technology development with use cases and requirements from each one of our regulatory jurisdictions. What we’re doing with the Tax in 2020 platform is building an application, a technology approach, but then we’re localising it, we’re creating the local requirements.

I’m on the phone every day, or in London or in Paris or in Asia almost every week, whether here in the US working through the specifics. Data privacy is a good example, as the data privacy rules are different in every jurisdiction. The actual tax calculations are different for direct, indirect, in one country versus another, and so the application, the technology itself needs to be localised, so that’s the big push, that’s the big investment we’re making – to create a common experience but a local feel, a local application.

Q: How much of that is cultural? When you’re visiting different countries and you’re trying to introduce this to people; how much of it is important to make sure that you’re focusing on each culture?

Chuck Kosal: It’s a tremendous amount. For example, one of the simplest things with technology development is the UI, the user interface creation, and it’s what excites people the most; it’s the most fun, the most creative. But the funny thing is you’re spending a lot of time on the behavioural science, the user experience side of it, because how your Americans, or folks in Europe ingest UI is very different to how professionals ingest it in Asia or Japan.

Your question is a great question when you look at user interface – how much real estate is actually functional is really different, so in Asia there’s an expectation that there’s a lot of functionality on the user interface, meaning there are a lot of options, a lot of choices, a lot of buttons that could be pushed. When you look at some other jurisdictions out there they actually like clean real estate. They just like a few choices and so culture is a huge driver, although we want to drive a common look and feel the cultural aspects of it are incredibly important in the context of a global rollout.

Q: When you do go and visit all of these different countries, what would you say are the biggest challenges that departments are facing with digital transformation; is it generally people’s willingness to adopt it, or is it very much the sense of people have already decided this is the way to go?

Chuck Kosal: Both are challenges, and I don’t think I could rank one in front of the other. I think the enormity of it – where to start – I think Andy would agree with that whether you are talking about localised transformation, clients asking ‘what’s the first thing I should do?’ There’s almost a level of paralysis, ‘where do I start when I think about all of this?’ and I think there’s no doubt that change management is also a very big impediment to success.

I will tell you that I think the change management issue is organically taking care of itself because of all the experiences we engage in every day. What we expect from Amazon or what we expect from Uber as an example, or when you think about search in Google or anything else, I think the world around us is changing and so our expectations are changing. There’s a phrase that I could cite called liquid expectation, expectations are all changing because everything we deal with in life.

You mention the banking and Andy talked about OCR, well OCR is different today to what it was five years ago. I don’t ever expect to go to the bank to deposit a cheque anymore. I expect to take a picture of that and just send it to them, upload it. The world around us, changing, will accelerate our ability to deal with change management within our professionals and our client base, but you’re right, that is still an impediment that you can’t look lightly at.

Andy Gold (L) and Chuck Kosal – Deloitte tax innovation team.

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